Planning to take out a loan?
How does CIBIL score affect loans?
Planning to take out a loan? How does CIBIL score affect loans?
A CIBIL score is a score for your credit history
When you think about taking, what’s the first thing that comes to mind? Is it the amount, term, or interest rate you need? But there is another factor that plays a crucial role in getting the loan approved. Your CIBIL Credit Score. What is the CIBIL score? Learn how to check CIBIL score, its importance and how it affects you in detail.
What is the CIBIL score?
A CIBIL score is a score for your credit history. It is usually a three-digit number between 300 and 900. A score above 750 is considered excellent. A person with this score has a higher chance of getting a loan. The CIBIL score is determined by looking at one’s past financial obligations and repayments. Checking the CIBIL score can also identify whether a person has ever defaulted on his repayments. A report containing the CIBIL score is called a CIBIL report.
Those with a low credit score have less chances of getting a loan from the bank. The CIBIL score is determined based on six criteria: credit factor, repayment history, credit utilization ratio, length of credit history, new credit inquiries and credit mix.
Why is CIBIL score important in getting a loan?
When one takes a loan or applies for a credit card, all financial institutions first check the applicant’s CIBIL score. They will ensure creditworthiness and risk profile. Only after that it will be decided whether to grant loan to the applicant. The CIBIL report will contain information including whether the applicant has been punctual in repaying the loan in the past. Financial institutions will grant loans only if the CIBIL score is good. So maintaining a good CIBIL score is very important.
Know in detail how your CIBIL score affects your chances of getting a loan.
1. Speedy Approval
A high CIBIL score will get you a loan faster. Lenders, trusting this high score, will process and approve your loan application more quickly
2. Reduced Interest Rates
Applicants with high CIBIL scores often get loans at lower interest rates. A higher score indicates lower risk.
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3. Flexible Repayment Options
If you have a high CIBIL score, there will be relaxation in the loan tenure, repayment schedule and interest rates. It enables you to manage your budget and money better.
4. Higher Loan Amounts
CIBIL score significantly influences your loans. Those with higher scores may get bigger loans. A high score indicates that you will be able to repay the loan on time. Due to this you will be able to borrow large sums of money.
5. Interest Rate Determination
Your CIBIL score influences the loan interest rate. Those with high scores often get loans at lower interest rates.
6. Repayment Ability Indicator
The lender also checks the CIBIL score to understand whether you have the ability to repay the loan. Because it helps you understand your credit history.
7. Risk of Rejection
Those with a low CIBIL score are likely to get their loan application rejected. Lenders may consider this as a risk factor
8. Improved Approval Chances
Those with a high CIBIL score are likely to get their loan applications approved quickly. Because borrowers with high scores are considered by lenders to have a low risk factor.
9. Credit Status Awareness
The CIBIL score gives you clear insight into your credit status, and this knowledge helps you make decisions related to borrowing and debt management.
10. Minimal Documentation
A high CIBIL score often helps reduce documentation requirements, lower interest rates, and speed up the loan application process.
How to raise your credit score?
If your credit score is not rising as you would like, don’t worry. Try to improve it yourself. It requires a precise plan and some patience. Below are some things that can help you achieve healthy credit habits and a high credit score.
1. Pay your credit card bills and loan EMIs regularly and on time.
2. Always keep your credit card balance low. Try not to use more than 30 percent of your available credit limit.
3. Keep your old credit accounts in good standing by using them frequently.
4. Apply for credit only when you need it and avoid sending multiple credit applications one after the other.
5. Do your best to find any errors or inconsistencies that could lower your score. Check your credit report and score regularly for that.
How to Check CIBIL Score?
There are many platforms where you can check CIBIL score for free. With these you can check CIBIL score online within minutes. You can also check your credit score by logging into the CIBIL website directly.